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Zoom Telephonics: Strong Management And Strategy Create Growth Potential

Jun. 05, 2020 12:53 PM ETMinim, Inc. (MINM)10 Comments
Rational Expectations profile picture
Rational Expectations


  • Zoom Telephonics sells modems and other devices under the Motorola brand.
  • It's currently break-even, at best, but a number of catalysts could trigger meaningful profits by 2022 causing the shares to rally.
  • Near-term catalysts may include: relocating production to reduce tariffs, a Nasdaq listing, growing product categories, increased B2B sales, and international expansion.
  • Their strategy makes sense and could create a runway for gaining market share given the company's small size today.
  • Management is strong, aligned with shareholders and potentially overqualified for a company of this size, suggesting big goals for the business.

Zoom Telephonics (ZMTP) is a small-cap growth opportunity that has demonstrated growth in excess of 20% over recent years. It will likely hit profitability in the next 12 months. Product quality is high, management is strong and well-aligned with shareholders. Zoom's plan to expand into B2B sales in addition to its current consumer channel may provide a further leg to growth. A Nasdaq listing could provide a further catalyst.


Zoom Telephonics makes cable modems and other networking equipment sold under the Motorola brand primarily. These products are sold to consumers through Walmart, Best Buy, Amazon, Target and others. It should not be confused with the video-conferencing company which is entirely separate.

Top line growth has been strong historically, though profitability continues to lag.

Source: Company Q1 presentation

Impressive Products

The company's products are well-regarded. They sell modems primarily under the Motorola brand, and generally appear to receive 4.5-star reviews or better on Amazon. Wirecutter ranked their cable modem the best in December 2019.

Growth Strategy

The company's strategy now calls for it to add a B2B element to its B2C business. It has well-reviewed products that consumers appreciate. It makes sense for them to offer these products to cable companies to provide to their users. It's another sales channel for the business, and they have a clear story with a quality product potentially requiring less customer support to maintain. The company doesn't sell into this market at any scale today, so it's largely upside.

Product expansion into cellular modems and digital home scenarios (IP cameras, home sensors, etc.) offers further upside, as does the prospect of medium-term international expansion. Given its size, this company has a large growth runway if it can continue to execute.


Executive chairman Jeremy Hitchcock owns 20% of the shares, recently buying more in a

This article was written by

Rational Expectations profile picture
Value-oriented ideas and special situations, generally mid/small cap. Also, orphaned and unfashionable investment ideas, ideally with a catalyst and the prospect of asymmetric upside/downside payoffs. Contrarian tendencies. To some extent I'll go anywhere if it's cheap and I'm more influenced by momentum and quality than I used to be.

Analyst’s Disclosure: I am/we are long ZMPT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Not intended as investment advice. Author does not undertaken to update this report or guarantee its accuracy. Author's holdings may change without notice. Please seek professional advice before making any investment decision. Investing involves risk of loss of capital.

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Comments (10)

Took profits at $ 9 and went short at the same price.
@Clark158f1 What is the news for today to justify this gain?

No news...someone decided to run it
Dilution, dilution, dilution
DF Ventures profile picture
At current share price of $3-4, are you still bullish on this company? New CEO and BoD seems to have given this company a facelift. However, they operate in a very competitive landscape, not sure if their products do actually have an edge over much larger competitors like Netgear
Alta500 profile picture
New ticker effective 12/8/20: Change from ZMTP to MINM
Rational Expectations profile picture
Also, a further update reflecting an exchange with investor relations post-publication. The company is currently very focused on retail rather than B2B. The prior CEO (Wytanis) arguably had some B2B objectives, and those could theoretically return in future, but for now the company very retail focused.
A couple of questions for you...….

(1) Why target a 20% tax rate in the near term when the company has in excess of $40M in carryforwards?
(2) Why have such a conservative looking revenue est. for 2020 of $47M when the company's rate of growth in Q1 is substantially above what you appear to have in mind for the entire year, and it'll only take an additional $5M+/- in sales growth over the last three quarters of the year to reach your estimate?

While interested parties are aware that ZMTP chose to forego a webcast at the time of Q1's earnings announcement, they might be interested to learn that mgt. will review the company's outlook, etc. after the business portion of the annual meeting, which is scheduled for 7/17 @ 10:00 a.m. The link is virtualshareholdermeeting.com/ZMTP2020.
Rational Expectations profile picture
@Double Eagle

(1) good point on tax-loss carryforwards, the firm's IR also made a similar point offline, here's the detail on that for those interested. Agree that's a source of further upside (from 10Q):
“As of December 31, 2019 we had federal net operating loss carry forwards of approximately $56.3 million which are available to offset future taxable income. They are due to expire in varying amounts from 2020 to 2038. As of December 31, 2019, we had state net operating loss carry forwards of approximately $11.4 million which are available to offset future taxable income. They are due to expire in varying amounts from 2031 through 2038. A valuation allowance has been established for the full amount of deferred income tax assets as management has concluded that it is more-likely than-not that the benefits from such assets will not be realized.

(2) Yes, the company could well over-deliver beyond that estimate in 2020 and indeed beyond. My main goal is to show that they are likely to get to profit this year, I didn't want to stretch the numbers too much to get there especially in a year like 2020.

Taking a step back, my goal is to show the company is cheap today, even on conservative assumptions. There appears to be a margin of safety here.
Ray Bonneau profile picture
I had been watching this company for awhile, and I finally made an investment into the company based on the Q1 report. The re-signing with Motorola to extend the licensing agreement through 2025 plus the move to Vietnam made this a good opportunity.
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